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GARCH copula quantile regression model for risk spillover analysis

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  • Tian, Maoxi
  • Ji, Hao

Abstract

To assess risk spillovers, this paper proposes a new GARCH copula quantile regression-based CoVaR model in which the nonlinear tail dependence is allowed to change with risk levels. Based on MSCI index daily data, we investigate the risk spillovers from four financial markets to the financial system of developed market. We find that Germany displays the largest risk spillovers, followed by France, the US and the UK, and that the risk spillovers are much larger during the COVID-19 pandemic than during the periods of the financial crisis and sovereign debt crisis.

Suggested Citation

  • Tian, Maoxi & Ji, Hao, 2022. "GARCH copula quantile regression model for risk spillover analysis," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001859
    DOI: 10.1016/j.frl.2021.102104
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    Cited by:

    1. Tian, Maoxi & El Khoury, Rim & Alshater, Muneer M., 2023. "The nonlinear and negative tail dependence and risk spillovers between foreign exchange and stock markets in emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 82(C).
    2. Tian, Maoxi & Guo, Fei & Niu, Rong, 2022. "Risk spillover analysis of China’s financial sectors based on a new GARCH copula quantile regression model," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    3. Tian, Maoxi & Alshater, Muneer M. & Yoon, Seong-Min, 2022. "Dynamic risk spillovers from oil to stock markets: Fresh evidence from GARCH copula quantile regression-based CoVaR model," Energy Economics, Elsevier, vol. 115(C).

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    More about this item

    Keywords

    Systemic risk spillover; CoVaR; Copula quantile regression model; GARCH copula model;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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